What is a Money Tree?
A money tree is a profitable investment vehicle that generates true passive income over time and on a regular basis. This investment vehicle should be able to take care of all your living expenses and should be readily available.
The idea of a money tree is what most people think about whenever finances come to mind. Being able to pick from your own personal money tree is a dream for most but can be a reality if done properly.
In our opinion, there is really one true way to grow your own money tree, a dividend portfolio.
What is a Dividend?
A dividend is a sum of money paid regularly by a company to its shareholders out of its profits (or reserve). Starting your own dividend portfolio is very easy and can be done in a day.
All you need is a brokerage account from a broker of your choice, some starting capital, and time. Getting to financial freedom or to a point where you can pick off of your money tree fast will require one of two things. Either a lot of time or a lot of capital; However, the ideal scenario is to have both.
Everyone should try creating a dividend portfolio because it’s a no-brainer, you should make money work for you. “If you don’t find a way to make money while you sleep, you will work until you die” – Warren Buffet
What should you invest in?
Getting the account is the easy part, picking the perfect companies is where the challenge is. Learning how to invest can be a daunting task but it’s not impossible especially in this day and age. There is an easier solution to accomplishing this, an index fund.
What is an Index Fund?
An index fund is a type of mutual fund whose holdings match or track a particular market index.
Examples of popular index funds are:
- iShares S&P 500 Value ETF (IVE)
- Schwab U.S. Large-Cap Value ETF (SCHV)
- Vanguard Total Stock Market ETF (VTI)
- Sagicor Financial Select Fund
- Sagicor Manufacturing & Distribution Fund
Pros
Index funds are diversified across many industries, thereby providing an additional layer of safety for investors.
Index funds have a lower transaction cost due to the fact that the investments are held until the index itself changes.
Cons
Index funds attract a management fee which is an additional cost than simply buying an individual stock.
Being overly diversified is a double edge sword, it smooths out volatility and lesser risk but it also limits the upside.
When to enjoy the harvest?
Planting the seeds and nurturing the crop is one-half of the pie, reaping the fruits of your labour is a feeling unlike any other. Knowing when to start reaping is not as easy as it sounds but is the ultimate end goal.
There is no one answer to this question and is actually specific to each individual. Knowing when to start using your dividend paycheque is depending upon your lifestyle, age, and living situation.
Achieving financial freedom is very possible, it just requires dedication and sacrifice.
